VIX Hits Record High, Easing Accelerates, and the Oil Price War Continues
March 18, 2020 | FIRESIDE CHARTS
Market swings are still coming at a breakneck pace as investor fear drives the VIX to record highs. Markets were slightly higher yesterday on the hopes of additional stimulus as the Fed, along with other central banks, continue throwing everything but the kitchen sink at the economy. Is there space in your mailbox for a $1,000 check? But the market quickly changed course, enough so that circuit breakers kicked in yet again today. This selloff has been the steepest in history, significantly outpacing the traditional multi-year timeline previous bears (and recessions) have followed. Fear is a powerful force! Meanwhile, the simultaneous deliberate oversupply and decimated demand for oil is only throwing fuel on the fire… What will it take to get the world’s leading producers on the same page? Finally, as China’s recovery from COVID-19 picks up steam, their market remains surprisingly stable and is significantly outperforming other global indices. Could that mean there’s hope for global markets as the coronavirus continues to reshape our daily lives?
1. “There is nothing to fear except fear itself!”
Source: The Chart Store, from 3/17/20
2. We have seen volatility before… but not quite like this… 3-4% led to 5-7% and now 10-12% swings.
Source: WSJ Daily Shot, from 3/17/20
3. Central Bank easing has been swift; but it needs to come with massive fiscal stimulus to make a difference…
Source: WSJ Daily Shot, from 3/18/20
4. While we understand the numbers are fluid, does a 2-8% drop in earnings warrant a 30% market decline? Especially when the -2% is in the world’s two largest economies…
Source: WSJ Daily Shot, from 3/17/20
5. The difference this time is speed: 2000-02 and 2007-09 took years to unfold… this has taken ~three weeks…
Source: WSJ Daily Shot, from 3/17/20
6. Historically, recessions are typically preceded by excess… In housing, debt, equity valuation; usually a large misappropriation of capital. This one seems to be based on fear and the reaction to fear.
Source: WSJ Daily Shot, from 3/17/20
7. Don’t forget the second “black swan” event… Saudi/OPEC’s flooding the market with cheap oil in an effort to bankrupt competitors, is also helping crater some industries…
Source: WSJ Daily Shot, from 3/18/20
8. Perhaps with some irony, the Chinese stock markets have held up much better than the rest of the world…
Source: WSJ Daily Shot, from 3/18/20
Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are they a recommendation to take any action. Individual securities mentioned may be helf in client accounts.